FedEx to buy more aircraft to raise long-haul capacity

In a clear sign of a revival in the logistics and air cargo sector, FedEx Corporation, the second-largest US package-shipping firm, said it will buy six additional Boeing 777 freighter jets to add capacity on the longest routes.

The global air cargo sector has been witnessing a slight upturn and according to International Air Traffic Association (Iata), global air freight operations are now within one percentage point of recovering to its previous high point of early 2008. The strongest recoveries have been seen in Latin America and the Asia-Pacific region.

FedEx which recently announced its first quarter that ended in February, posted an 18 per cent jump in international priority volumes, which are among its most profitable offerings. The increase was led by rising demand in Asia.

Recently Dutch postal and express company TNT reported a bigger-than-expected rise in first quarter net profit, buoyed by higher sales and cost cutting, and echoed competitors' statements that markets look set to improve this year.

United Parcel Service, too, last month posted first-quarter sales that beat analysts' estimates on increased demand overseas. Revenue climbed 7.2 per cent to $11.73 billion (Dh43bn) . Net income gained 33 per cent to $533m. UPS benefited from an 18 per cent rise in international packages, and US domestic shipments climbed 0.4 per cent, for the first gain in more than two years.

German flagship airline Deutsche Lufthansa last week raised its earnings outlook for its logistics unit as the gradual economic recovery helps increase demand for air freight services.

In a statement posted on its website, the US-based company said it plans to take delivery of six of the jets in the fiscal year that begins in June, two more than previously intended. Capital spending still will be $2.9bn for the year that ends this month, the company said.

FedEx already has two of the 777s on routes from Shanghai and Hong Kong to its main sorting hub in Memphis. Jess Bunn, a company spokesman, said FedEx has not disclosed the routes for the additional planes.

The planes can carry 178,000 pounds of cargo 5,800 nautical miles, which is 6,675 land miles. This is a 14,000-pound and 2,100-nautical-mile improvement compared to the MD-11Fs, which had been FedEx's primary long-haul aircraft.

The 777Fs will also save two hours off the company's cut-off time for drop-offs and reduce emissions by 18 per cent. The planes, which are the world's largest twin-engine cargo planes, first connected the FedEx SuperHub in Memphis with Shanghai, China.

Meanwhile, according to Iata announcement for the month of March 2010, the strongest recoveries have been seen in Latin America and the Asia-Pacific region, which have respectively seen increases in demand of 47.9 and 34.1 per cent.

North America has also seen a strong improvement in demand, up 32.2 per cent. Europe's carriers saw the weakest improvement, at 11.7 per cent, which Iata attributes to the slow recovery in the region.

It also stated that though the recent ash cloud problems which halted air transport across much of Europe will have some effect on April's figures, but the rapid reestablishment of services will not impede the recovery in demand too greatly.

International air freight volumes shrank by over one quarter during the second half of 2008. The upturn in the business inventory cycle has almost eliminated that decline, although the upturn for international air freight has taken twice as long as the collapse.

A senior official of Lufthansa, which raised its earnings outlook for its logistics unit said, the recovery trend in a not a temporary phenomenon and would continue.

"We currently don't see an end of the recovery [in the Cargo business]," said reports quoting Chief Financial Officer Stephan Gemkow.

He added that Lufthansa consequently expects its Cargo unit to post an operating profit in 2010, compared with the €171 million (Dh796m) operating loss in the previous year. Earlier this year, the company had only forecast a "significant" improvement in the operating result at Lufthansa Cargo.

The UAE too has witnessed a significant increase in air cargo movement and in Dubai alone freight volumes are expected to rise 12.2 per cent this year. (With inputs from Agencies)